Ask three nationally respected investment gurus their market predictions for 2011 and their responses will reflect their individual investment style.

They are David Dreman, a pioneer in contrarian value investing and chairman and chief investment officer of Dreman Value Management; growth manager Louis Navellier of Navellier & Associates; and Muriel Siebert, founder, president and CEO of Muriel Siebert & Co.

They share an extraordinary interest in Wall Street and experience working in that financial arena. Navellier has 25 years under his belt; Dreman and Siebert, more. All three also are authors.

Here are their perspectives on bonds and interest rates, whether the country is in a recession or depression, and investing concerns and outlooks for the new year.

Bonds, interest rates

Here is what each expert says about bonds and interest rates in 2011.

Siebert:

Bonds are running counterproductive. We are seeing interest rates that are at their lowest rates in decades; we need them to stay low, and the Fed is acting like they want rates to stay low.

But, there seems to be an inflationary current going through the world today. If that inflationary current continues to be global, we're going to have inflation and that means interest rates will go up. That is counterproductive when we are trying to encourage companies to loan money, buy equipment and hire people.

In the current environment, inflation is raising its ugly head, although it is contained. Will it be contained six months from now? I don't know.

Navellier:

We've had our Fed doing its economic quantitative easing, which has essentially meant buying government bonds and trying to push yields down, and (it) has been severely criticized for this.

But when Europe had to throw in the towel and take similar action, we look pretty good in retrospect.

Ben Bernanke made it very clear on 60 Minutes that he's going to keep, for lack of better words, "stimulating" the economy and likely continue his QE2 plan in 2011.

Why Bernanke is so interesting is that he argues when Japan had their problems in the 1990s, they weren't stimulated enough.

One of the things that is happening, and is very acute here in Florida, is that people can become extremely frustrated with the low interest rates. I don't mean to scare anyone, but the Fed cannot raise rates significantly. So we are going to be in a low-interest-rate environment for about five or six years or more.

And the reason is pretty simple: It's because of the interest due on the deficit.

Dreman:

I'm not very bullish on bonds.

I think the Federal Reserve is printing money and by the middle of 2011 will have created close to $5 trillion in budget deficits to stimulate the economy.
What that means is we are going to see some very major inflation. I don't think it will really come in the next year or two because unemployment is so high. So it might not come for a few years. But Bernanke is trying to get rates to go lower and it is backfiring on him.

Investors are already starting to see inflation in the yields on the 30-year bond.

Prices on it are down and the yields have actually gone up about 1 percent when he wanted them to go down. That affects mortgage rates and everything else.

Every 1 percent rise in 30-year Treasury bonds costs a person about 16 percent of their capital, so you don't want to be in long-term bonds. I think investors will probably have to forego income temporality to protect their capital and stay in short maturing bonds.

If people need to own bonds, they ought to consider three-year maturing ones at the most. These won't be yielding much, but they will protect their capital.
So I'm not bullish on bonds over time.

Recession or depression?

Siebert:

I think we are still in a recession. But we're hanging in there. We are no longer an industrial country. The pickup in automobiles is a blessing, but there are still not a lot of jobs in the Midwest.

So we have to come up with something new, say in technology. There is plenty of money kicking around in this country in the private equity firms. And there is no reason why they can't finance some of these kids graduating from really high-tech institutions if they've got great ideas.

I don't want to see jobs going to China or India or Shanghai. I want to make sure they are happening here.

Navellier:

Florida, unfortunately, is in a recession while much of the rest of the country is doing fine.

Florida has been hurt by the downturn in travel and high property taxes destroying real estate values.

But I think you'll find that every secondary home market is soft whether it's in Lake Tahoe, Park City, Colorado or Florida. That's because if someone buys a home in a secondary home market, they're often subject to the alternative minimum tax. And that has really taken a toll.

Dreman:

Whether we are in a recession or depression all depends upon terminology and the terminology has changed. They used to call similar economic conditions a depression. But that's a d-word and we don't use the d-word now.

If we are comparing what happened in previous depressions, like the ones in the 1870s, or in 1907 or the Great Depression, yes, we were in a depression. But, we're working our way out of it now. The progress however, is very, very slow.

The Federal Reserve is projecting that we're not going to get back to 5 percent unemployment for another five years. So we're going to have a major unemployment problem for years to come. The recovery is probably going to be one of the slowest recoveries in modern history.

Investing concerns

Siebert:

Investors need to look at the products a company makes before they invest in a company. Does it have working capital? Money to expand? Do they make a product that's going to continue to sell? These are all questions they need to get answers to.

And we need more transparency. The public needs to know what has traded during the day because there is too much that is not being seen that the public is entitled to see it.

Navellier:

The frustration of low interest rates will eventually cause more people to go into the stock market.

Regarding bonds, there is a duration risk out there that can occur when investors sell their bonds before they mature. But that, too, just naturally gets money moving in the stock market.

There are also big fiscal concerns within the states. We do not, under any circumstances, want the federal government to bail out our states.

Only a few states don't have fiscal problems. For the rest, I just think we have to force austerity on them.

So if the stock market continues to go up, it will take some pressure off the states that have fiscal problems and our economy. The United States can grow its way out of its financial problems better than many other countries can.

Dreman:

I think inflation is going to be a real threat.

Some people will benefit from inflation -- if you own a house, inflation will be good because the values will go up. But if people own bonds, and inflation goes up, that money just loses its purchasing power.

Since World War II, we've lost 92 percent of the value of the dollar. In other words, the dollar now buys only 8 cents of what it bought in 1945. It's really pernicious. And if we see inflation a few years out, people could lose 30 percent to 40 percent of their purchasing power.

Now, over that same period of time the Dow has gone up multiple times -- from around 140 in early 1940s to close as high as over 14,000. Today it's over 11,500.

Overall outlook

Siebert:

There will be plenty of opportunities to make money. You can make money in small companies and large ones, but you have to do your homework. You can't buy just because you're buddy tells you this $2 stock is going to $10.

Navellier:

Well, I'm very bullish.

A lot of people don't realize that stocks are usually the strongest during the third year of a presidential election term. Since 1962, the S&P has gone up 20.9 percent on average in the third year.

Dreman:

The average investor, unfortunately, they've been battered a lot.

Many lost a third of the money or more that they put in the market. In 2002, for example, during the Internet bubble, $7 trillion was lost. The amounts of money lost in recent markets downturns could probably add another $7 trillion or 8 trillion. And then we had the flash crash.

People are frightened of the market. And when you are frightened, you do exactly the opposite of what you ought to do. You run to what is perceived as safe, which is probably government bonds. I'm frightened that a lot of people will be trapped by buying 10-, 15-, 20-year bonds at exactly the time they should be buying stocks. There are outstanding opportunities right now in the stock market and in income-producing, dividend-paying stocks. Even though there is likely to be volatility, I think the stock market is really the place to be.

Editor's Note: This is the second in a two-part series on the market outlook for 2011.